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CALIFORNIA CORPORATE & SECURITIES LAW

The High Price Of Trying To Enforce The Unenforceable

Readers of this blog will know that California marches to its own drummer when it comes to the enforceability of covenants not to compete. California Business & Professions Code Section 16600 declares these covenants void unless they fall within a statutory exception. Nonetheless, some companies continue to insist on including non-compete clauses in their agreements.…

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Nevada Supreme Court Refuses To “Blue Pencil” Unreasonable Non-Compete

Nevada, unlike California, applies a reasonableness test to non-compete agreements.  Although the Nevada courts haven’t identified a specific heuristic to be followed, a covenant not to compete will be found to be unreasonable when in the absence of statutory authorization or dominant social or economic justification, “it is greater than is required for protection of the person for whose…

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New LLC Is Not Delivered By Sale Membership Interests

Readers of this blog should be well aware of California’s general antipathy to covenants not to compete.  See The Point Of An Unenforceable Noncompete May Be Very Sharp Indeed,Covenants Not To Compete – Fourth DCA Considers A New Fine Question (Or Two), TRO Issued Enjoining Breach Of Non-Compete Agreement Clauses, No Surprises Here – California Court…

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Covenants Not To Compete – By The Numbers

In a recently published article, three professors undertook an empirical analysis of noncompetition and other restrictive postemployment covenants in public company Chief Executive Officer contracts.  Norman D. Bishara, Kenneth J. Martin, and Randall S. Thomas, An Empirical Analysis of Noncompetition Clauses and Other Restrictive Postemployment Covenants, 68 Van. L. Rev. 1 (2015).  Readers should be cognizant…

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The Point Of An Unenforceable Noncompete May Be Very Sharp Indeed

Writing for Mother Jones, Kevin Drum recently asked “What’s the point of an unenforceable noncompete agreement?”  He posits two possible answers: First, it’s just boilerplate language they don’t really care about but left in just in case.  The second is that they find it useful as a coercive threat. UCLA Law School Professor Stephen Bainbridge picked…

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California Court Issues Non-Competition Order

Covenants not to compete have been in legislative disfavor in California since 1872.  This animus is currently codified at Section 16600 of the Business and Professions Code which provides that with certain statutory exceptions “every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that…

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Covenants Not To Compete – Fourth DCA Considers A New Fine Question (Or Two)

I’ve written many times about Section 16600 of California’s Business & Professions Code which, with limited exceptions, voids covenants not to compete.  See TRO Issued Enjoining Breach Of Non-Compete Agreement Clauses, No Surprises Here – California Court Won’t Enforce Non-Compete, Court Says “No Way” To No-Hire, and California’s Hostility To Non-Compete Agreements Does Not Vitiate Forum…

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California’s GO-Biz Site Bedeviled By Errors and Omissions

According to the website, the California Governor’s Office of Business and Economic Development (GO-Biz) was created “to serve as California’s single point of contact for economic development and job creation efforts”.  While the site does provide some very basic level of information, it is dangerously incomplete and riddled with manifest errors.  No advice would be better…

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U.S. Supreme Court Holds That State Courts Must Not Assume The Arbitrator’s Role By Declaring Non-Compete Agreements Null And Void

A short per curiam opinion issued yesterday by the United States Supreme Court concerning an employment dispute in Oklahoma is likely to result in consternation in California.  Nitro-Lift Technologies, L.L.C. v. Howard, 568 U.S. ___ (2012) involved a dispute between an employer and two of its former employees.  The employees had signed confidentiality and noncompetition agreements that…

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Court Rejects Use Of Alter Ego Doctrine To “Borrow” Contractor License

California’s Contractors’ State License Law, Business & Professions Code Section 7000 et seq., requires contractors to be licensed unless they are exempt from licensure.  Those who perform contracting work without a license run a very real risk of working for free.  Section 7031(b) provides, with one exception, that a person who uses an unlicensed contractor may bring…

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